Onsite pricing was up 2.7%, while offshore pricing declined by 0.5%. In INR terms revenues grew at a slower rate by 2.4% QoQ impacted by rupee appreciation during the quarter. EBITDA grew by 41.5% YoY, but fell by 4.9%.

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HDFC sec Scrip code Industry CMP (Rs.) Recommended Action Averaging price band (Rs.) Target (Rs.) Time Horizon
MINDTREQNR IT 975.1 Buy at CMP and add on dips 828‐864 1045 1 quarter
In our Q4FY14 Result Review dated April 26, 2014, we had recommended investors to buy Mindtree Ltd. (MTL) at the then CMP of Rs. 1430 (cum bonus 1:1) and add it on
dips to Rs. 1297‐1359 for a price target of Rs. 1544 (cum bonus) over the next quarter. Thereafter, the stock touched a low of Rs. 1298.4 on May 19 and subsequently met
our price target on June 02, 2014. On June 03, 2014, the stock became ex‐bonus (1:1). It touched a new high of Rs. 998.9 on July 23, 2014 (ex bonus). Currently, it is
quoting at Rs. 975.1.
MTL’s Q1FY15 results were above our estimates. We present an update on the stock.
Key highlights of Q1FY15 results: (Consolidated)
• In USD terms, revenue stood at $141.3 mn, a growth of 6.4% Q‐o‐Q and 20.1% Y‐o‐Y. Sequential growth was driven by a mix of volume growth (6%) and improvement
in blended pricing (up 0.5%). Onsite volumes grew by 4.8% Q‐o‐Q, while offshore volumes increased by 6.3% Q‐o‐Q. Onsite pricing was up 2.7%, while offshore pricing
declined by 0.5%. In INR terms revenues grew at a slower rate by 2.4% Q‐o‐Q impacted by rupee appreciation during the quarter.
• EBITDA grew by 41.5% Y‐o‐Y, but fell by 4.9% Q‐o‐Q. EBITDA margins improved by 159 bps Y‐o‐Y, but fell by 154 bps Q‐o‐Q respectively. Sequential fall in margins was
due to higher visa cost & rupee appreciation. However, greater revenue productivity and the operational improvement (higher utilisation) partly offset the higher
operational costs during the quarter.
• PAT declined by 4.4% Y‐o‐Y, but increased by 31.5% Q‐o‐Q, supported by forex gains of Rs. 137 mn in Q1FY15 compared to forex loss of Rs. 426 mn in Q4FY14 (in
Q1FY14, forex gains stood at Rs. 618 mn as a result of which PAT declined on Y‐o‐Y basis). PAT margins declined by 556 bps Y‐o‐Y, but improved by 339 bps Q‐o‐Q to
15.3%. EPS for the quarter stood at Rs. 15.5 vs Rs.16.3 in Q1FY14 and Rs. 11.8 in Q4FY14 (on ex‐bonus equity capital).
Quarter Financials: (Consolidated)
(Rs. in Million)
Particulars Q1FY15 Q1FY14 VAR [%] Q4FY14 VAR [%] Remarks
Revenue from operations 8435 6477 30.2 8237 2.4
USD revenues grew by 6.4% Q‐o‐Q, which was impressive, driven by a mix of robust volume
growth (6%) and improvement in blended pricing (up 0.5%). Vertically, Hi‐tech & Media
services and Travel & Hospitality reported strong growth, while among services, Package
Implementation, IP led revenue, Development, IMS & Consulting delivered strong growth.
Geographically, the growth was broad based, driven by strong growth from US & Rest of the
World (ROW)
Employee Benefit Expenses 4874 3824 27.5 4869 0.1
SG&A Expenses 1876 1462 28.3 1596 17.5 Higher visa cost resulted in increase in SG&A expenses
EBITDA 1685 1191 41.5 1772 ‐4.9
Finance Cost 0 1 ‐100.0 0 ‐
RETAIL RESEARCH July 23, 2014Mindtree Ltd. (MTL) – Q1FY15 Result Update

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Depreciation 228 181 26.0 223 2.2
Other Income 210 735 ‐71.4 ‐298 ‐170.5
Other income included forex gain of Rs. 137 mn compared to gain of Rs. 618 mn in Q1FY14
and a forex loss of Rs. 426 mn in Q4FY14.
PBT 1667 1744 ‐4.4 1251 33.3
Tax (DT & FBT) 373 390 ‐4.4 267 39.7 Effective tax rate on PBT increased by 1 bps Y‐o‐Y & 103 bps Q‐o‐Q to 22.4%.
PAT 1294 1354 ‐4.4 984 31.5 Forex gains in Q1 resulted in higher sequential PAT growth.
EPS (Rs.) 15.5 16.3 ‐4.9 11.8 31.2
Equity 836 832 0.5 834 0.2
FV 10 10 0.0 10 0.0
EBITDA (%) 20.0 18.4 8.6 21.5 ‐7.1
Q‐o‐Q fall in margins was due to higher visa cost & INR appreciation. However, greater
revenue productivity & operational improvement partly offset the higher operational costs.
PATM (%) 15.3 20.9 ‐26.6 11.9 28.4
(Source: Company, HDFC Sec)
Other highlights
• Geographically, the revenue growth was broad based with US & ROW witnessing strong growth of 7.1% & 18.9% Q‐o‐Q. Europe reported growth of 1.8% Q‐o‐Q, while
India business grew marginally by 0.6%, though better than the previous quarter.
Geography wise revenue distribution:
Particulars Q1FY15 Q4FY14 Q1FY14
US 59.2% 58.8% 57.8%
Europe 26.8% 28.0% 27.4%
India 3.5% 3.7% 5.8%
Rest of World 10.5% 9.4% 9.0%
• Vertically, Hi‐tech & Media services and Travel & Hospitality reported strong growth of 9.5% & 13.2% Q‐o‐Q respectively. The Hitech vertical (excluding media) grew by
8% Q‐o‐Q during the quarter driven by the new wins, IP led revenue and growth in certain large accounts. This is second quarter of strong growth. The company
reclassified media vertical from Travel to the Hitech vertical during the quarter.
Revenue by Industry Vertical:
Particulars Q1FY15 Q4FY14 Q1FY14
Hi‐Tech & Media Services 32.7% 31.8% 34.1%
BFSI 22.7% 23.3% 22.8%
Retail, CPG & Manufacturing 21.2% 22.1% 20.9%
Travel & Hospitality 16.4% 15.4% 14.5%
Others 7.1% 7.5% 7.7%

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• Among the service offerings, Package implementation (up 40.1% Q‐o‐Q), IP (up 64.4% Q‐o‐Q), Development (up 10.5% Q‐o‐Q), IMS (up 8.1% Q‐o‐Q) and Consulting (up
6.4% Q‐o‐Q) delivered strong growth. The strength in the digital services continues to provide strong traction. The management stated that the IP revenues are to be
lumpy in nature. There is strong momentum on the demand scenario in the last two quarters. However, IP revenues are likely to be less in Q2.
Revenue by Service Offerings:
Particulars Q1FY15 Q4FY14 Q1FY14
Development & Engineering 33.9% 33.1% 37.8%
Maintenance 20.6% 22.6% 22.5%
Consulting & IP Licensing 5.5% 4.9% 4.3%
Package Implementation 5.4% 4.1% 3.2%
Independent Testing 15.7% 16.7% 18.0%
Infrastructure Management & Tech Support 18.9% 18.6% 14.3%
• The company signed orders worth USD 165 mn and it was the 4th quarter of continues improvement in the order book. It is seeing good traction with clients through
multi‐year, multi‐million dollar deals. Apart from strong demand across the traditional service lines, it's now getting picked up as the lead partner for digital by many
Fortune 100 customers.
• It has 206 active clients as of June 30 2014. The USD 5 million clients grow to 26; USD 1 million clients grow to 75.
• It added 516 employees during the quarter on a gross basis. The Employees were at 12845 as of June 30 2014. On campus hiring, the company stated that the first
couple of batches have already joined. The next batch of the 300 people will join in the Q2FY15.
• The Trailing 12 month's attrition is at 14.2% from the 12.7% last quarter. The increase was due to the seasonality and industry trends where Q1 attrition is slightly
higher. This is expected to improve going forward.
• The Utilization increased to 72.4% in Q1'FY15 compared to 68.7% in Q4'FY14.
• The Capex stood at USD 6.8 mn during the quarter.
• The DSO's increased marginally to 71 days during the quarter.
• The hedges are USD 38 mn and are covered for the entire Q2.
Conclusion & Recommendation
MTL’s Q1FY15 results were above our estimates. Healthy volume growth, improvement in pricing, broad based growth across geographies and verticals, improvement in
utilisation and optimistic management commentary on outlook were some of the positive highlights of the quarter. Fourth straight quarter of improvement in order book
was encouraging. While the margins fell sequentially, as expected, the decline was limited & better than our expectations, as greater revenue productivity and the
operational improvement (higher utilisation) partly offset the higher operational costs & impact of INR appreciation. Sequential PAT growth was supported by forex gains.
Given the overall positive momentum and the visibility, the Company expects to beat the NASSCOM guidance of 13‐15% (USD terms) industry growth for the FY15. It
further indicated that FY15 will be better year than FY14. Strong Q1, robust traction in top 10 clients, healthy deal pipeline and growth recovery witnessed in key IT
markets viz; US & Europe makes us feel that MTL would be able to sustain its growth momentum. The outlook for the margins for the Q2 (excludes currency fluctuation)
has headwinds from i) 85% of the employees will receive the 6‐10% wage hike ii) 300 people campus hiring in Q2. However, the management stated that these would be

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partly offset by the revenue growth and operational improvement. We feel the utilisation rates are at multi year lows, which could act as margin lever for FY15. Further,
MTL continues to see steady improvement in contribution from fixed price projects, which could further support the margins.
We feel MTL could surpass our FY15 projections. Hence we are enhancing our revenue, operating profit & PAT estimates by 3.1%, 2.2% & 1.7% respectively. Revised EPS
for FY15 is estimated at Rs. 62.7 (Rs. 61.8 originally estimated). We have incorporated projections for FY16, wherein we expect MTL’s net sales, operating profit & PAT to
grow by 16.5%, 15.3% & 14.9% respectively. EPS is estimated at Rs. 72.
Valuing the stock at 14.5xFY16E EPS, we arrive at a price target of Rs. 1045. We recommend investors to buy the stock at CMP and average it on dips to Rs. 828‐864 (11.5‐
12xFY16E EPS) for our price target over the next quarter.
Financial Estimates:
(Rs. in Million)
Particulars FY12 FY13 FY14 FY15 (OE)* FY15 (RE)* FY16 (E)
Revenue from Operations 19152 23618 30316 34106 35166.6 40969.0
EBIDTA 2930 4864 6102 6816 6963.0 8029.9
Adjusted PAT 2185 3393 4510 5150 5239.8 6022.4
EPS (Rs.) 27.0 41.9 54.3 61.8 62.7 72.0
OPM (%) 15.3 20.6 20.1 20.0 19.8 19.6
PATM (%) 11.4 14.4 14.9 15.1 14.9 14.7
PE 36.1 23.3 17.9 15.8 15.6 13.5
*OE = Original Estimates; RE = Revised Estimates (Source: Company, HDFC Sec Estimates)
Analyst: Mehernosh K. Panthaki – IT, FMCG & Midcaps; Email ID: mehernosh.panthaki@hdfcsec.com
RETAIL RESEARCH Tel: (022) 3075 3400 Fax: (022) 2496 5066 Corporate Office
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2496 5066 Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com
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